November 1, 2016
Ontario’s electricity ratepayers or customers were somewhat surprised when the OEB (Ontario Energy Board) announced on October 19 there would be no change to electricity rates for the following six months. That announcement was only the third time out of the last 18 since 2007 where rates didn’t increase.
Many commentators said, however, this can’t hold and the government has simply punted a rate increase down the road. So, what is likely to happen come Spring 2017?
We have some clues in recently released information. The IESO (Independent Electricity System Operator) just published the September 2016 Monthly Market Report which provides the Class B weighted average of both HOEP (hourly Ontario energy price) and the Global Adjustment for the first nine months of the current year, representing the commodity cost. For the first nine months of 2016, the raw commodity cost’s “weighted average” was $110.93 per megawatt hour (MWh) compared to $98.88/MWh in 2015.
So, that would be up: that signals a 12.2% increase year over year in the electricity1. generation cost.
The IESO has also been posting the consumption and costs of the HOEP and the GA for each of the two customer classes A and B; if you calculate the difference between Class A and Class B consumption and costs for the same period as noted above you discover this.
- Class A ratepayers increased consumption by 2 terawatts (TWh) from 19 TWh to 21 TWh whereas Class B ratepayers decreased their consumption from 87 TWh in 2015 to 86 TWh year over year.
- Class A ratepayers paid $70 million more for the additional 2 TWh which was at the bargain price of 3.5 cents per kWh. The raw commodity cost for Class A ratepayers declined from $65.42/MWh in 2015 to $62.50/MWh in 2016 for a 4.4% reduction.
Class B ratepayers may have reduced the electricity consumption (by 1 TWh or 1 billion kWh) but they paid an additional $893 million over 2015. The extra cost for Class B ratepayers of 1.04 cents per kWh is equivalent to just over $90 a year for the “average” household.
That cost will presumably find its way to the next announcement in mid-April 2017 when the OEB tells us what households will be paying for the six months commencing May 1, 2017.
The Class B to Class A shift will increase further (implementation date has not been announced) in the future, based on Energy Minister Thibeault’s announcement in a press release on September 15, 2016, granting an additional 1,000 plus companies access to the Industrial Conservation Initiative (ICI) program.
The balancing act of trying to retain jobs while greening Ontario’s energy generation via the Class B to Class A subsidy (now approaching $1 billion annually) appears set to create more energy poverty in the Class B group despite removal of the 8% provincial portion of the HST.
The Spring forecast? Increased electricity rates.
1. This does not include transmission, regulatory, distribution, etc. costs.